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August 28, 2014
It’s understandable: Life happens, years go by, and then suddenly you realize retirement is a lot closer than it seemed just a year or two ago. Although most financial advisers recommend at least starting a modest retirement plan as early as in your 20s, that doesn’t always happen. The good news is that it’s never too late to start.
Retirement Planning is FlexibleVery young people have the luxury of contributing toward retirement in small increments over many years and investing with more risk. That makes it less challenging, and gives money time to grow into something more. When you’re getting a bit of a late start, you have to modify your approach to get meaningful results. This means you’ll need to make significant contributions as early and as often as you can. It also means investments should be more stable, such as bond mutual funds, since a loss on high risk investments might not have time to even back out before you need access. Delay retirement for as long as you can, cut back on unnecessary spending, and start paying off debt. Forbe’s magazine also recommends taking advantage of the tax breaks from contributing to your company’s 401k or a personal IRA. The IRS allows for “catch-up contributions,” in 4 different plans, but there are stipulations. Contributions to your 401k, 403b, SARSEP, and the governmental 457b are limited to $5,500 annually. For people over 50, the IRS may allow higher contributions.
Saving Doesn’t Have to Be ComplicatedYou might not have as much time as you did years ago, but that doesn’t mean you’re stuck with no retirement and no plan for the future. Look around, and you might spot one resource that you hadn’t thought about tapping into before. Your home’s equity can be a valuable tool for helping finance your retirement. Through a reverse mortgage or another method that lets you tap into your home’s equity, you could find more than you imagined. There are other ways to save and help grow your nest egg. Many of them seem small but it all adds up. Prudential recommends cutting back on unnecessary things such as high-cost cell phone, Internet, and cable plans, and raising the deductible on your homeowner’s and vehicle insurance policies. Every dollar that you save could help make retirement more secure. Placed into a tax deferred plan, Uncle Sam won’t take a bite out of it while you’re working toward your goal. It’s Really Never Too LateEven if you’re already retired, you’re not out of options. In fact, your home’s equity might be more accessible now than before. The minimum age for acceptance into a reverse mortgage program is generally 62. You might also think about going back to work, either full or part time. The longer you work, the more you’ll have to set aside for the future. And the future might be longer than you think, considering Americans live longer lives now than in history. Start by outlining where you are now, and what you’ll need to live comfortably later. Create a financial statement, and work toward streamlining all excess spending to work toward that goal. When planning for your retirement, it’s really never too late to start. Every dollar counts, and you can make the positive changes now that will affect the rest of your life.
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